Is the business plan dead?

[This answer is reposted from Quora Is the business plan dead?]

Yes and no.

A business plan as a lengthy 40 page document which lays out a five year plan is still used in many companies, in many industries, in many countries around the world.

In Technology…

In technology companies such as Web 2.0+, business plans are falling out of favor simply because the pace of business is faster than you can write.

By the time most companies or individuals can prepare a well researched 40 page document which contains all of the relevant market research including customer interviews, initial partner & distribution details and so forth…well…the market has moved on.

In the mean time, some punk who sketched out a one page business model (see Alexander Osterwalder‘s What is the Business Model Canvas?) and built a Minimum Viable Product is already to market and has locked up $2 million in venture capital.

Unknown Unknowns

The premise of a business plan is that the state of the market is known and can be reasonably predicted. In a startup, (particularly a tech startup) this is simply not true.

Due to the fast pace of business, most of the five year predictions offered by business plans are entirely theoretical and not likely to survive frequent market disruptions. This is especially true if the business plan itself is attempting to predict the effects of market disruption.

Crystal Balls that Work

There are some situations where a business plan is entirely appropriate.

Slower paced industries such as construction, pharmaceuticals, or aerospace have long iteration times and well established business models which are not likely to change in the near term. This well understood market information leads to greater predictability.

Similarly, many businesses which are not attempting to innovate but capitalize on an existing business models are great candidates for a business plan. This might include restaurants (probably don’t need 40 pages though,) companies taking an existing business into a new territory, large companies which have in depth market knowledge and are expanding their product lines, etc.

Market Knowledge = Predictability

The business plan will never die, but at this point most people are simply realizing when it is inappropriate to use them.

So…what should I post next? Tweet to tell me what to write:

Show me how to test product market fit!

or

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